Parliament last week passed an act to pave the way for privatisation of Royal Mail. Don't hold your breath, though: on the basis of Tuesday's financial performance, a sell-off is currently impossible. And, if the government is serious about protecting taxpayers' interests, privatisation won't happen for years.

Look at Royal Mail's numbers. For the fourth year in a row, there was an outflow of cash. Operating profit, ignoring exceptional items, fell from £180m to £39m. The letters division fell into a loss of £120m, from a profit of £20m. This is not a company in a condition to be sold.

Then consider the obstacles that have to be cleared before the shape of privatisation could even be discussed. The European commission has to approve the package of state-aid for Royal Mail, including the government's plan to tow away both the assets and liabilities of the pension fund.

Conceivably, Brussels could demand major sell-offs, such as GLS, the profitable European parcels business. That would be a major turn-off for private investors.

Then consider the challenge of agreeing, and then implementing, a new regulatory regime. Business customers – who account for 90% of Royal Mail's revenues – will lobby to resist steep price rises. Private operators will point to their own losses to defend their privileges.

All the while, the volume of letters will decline – 5% a year is still being forecast. It is simply unrealistic to expect Ofcom to deliver business secretary Vince Cable's promise of a "level playing field" on postal regulation at the first attempt.

But the detail of the new regulatory regime will, to a large degree, determine Royal Mail's profits for years to come.

The sensible policy is to establish a new system, then fine-tune it, then allow it to be seen to work. That process will take years if it is to be done properly. Only then could a fair value for Royal Mail be estimated with confidence, as private investors will know and ministers ought to admit.

If the government tries to rush privatisation, it will end up short-changing taxpayers. Get the regulation right first.